As Asia's appetite for energy surges, the desire of the region's leaders to ensure a reliable flow of reasonably priced oil and natural gas will also intensify. If they fail, A sia's fast-growing economies could stumble. A race is now under way—between China and India, in particular—to buy energy reserves in such far-flung places as Iran, Russia, and Sudan.

The magnitude of Asia's future energy needs explains this urgency: the region's share of global consumption will nearly double in the next 20 years, to about 48 percent for oil and 22 percent for natural gas. By 2010, the region's oil consumption will surpass North America's. Such rapid growth has led world energy markets to their most critical juncture in more than two decades: today's tight supply and hefty prices could conceivably spark an energy boom and bust like the one that shook the world economy in the 1980s.

How might this scenario come about? If, in response to the tight supply, oil-producing countries that don't belong to the Organization of Petroleum Exporting Countries were to add significant capacity, thus increasing their market share, OPEC might in turn attempt to boost its production, generating a global oversupply. The price volatility inherent...